"There is always an easy solution to every human problem — neat, plausible, and wrong." Little did he know it when he penned these words, but journalist H.L. Mencken was tapping into the very core of behavioral decision making and the need to understand and compensate for it.
Every day, senior managers are tasked with making very significant strategic decisions for their companies, which usually require support by teams of internal and external experts and a heavy dose of research. Theoretically, knowledge-based decision making underpins every successful organization. But, as Plato pointed out, "Human behavior flows from three main sources: desire, emotion, and knowledge." First-hand experience and best sellers like Daniel Kahneman's Thinking, Fast and Slow have confirmed an even broader range of behavioral vulnerabilities and vagaries in our abilities to make decisions as human beings.
For those of us tasked with modeling the risk/reward potential of various business opportunities, the need to address these influential, often subconscious factors in the modeling process is compelling. In the enterprise risk management (ERM) arena, in particular, it is mandatory that incisive analysis of decision options means taking rigorous steps to challenge not only the scenarios we develop, but also their underlying assumptions.
As long as the human mind is conditioned, it operates with constraints, an intelligent mind is free and have no bias, in this unrestricted state of mind, one can be practical, meaningful, and objective. It is a course of meditated focus, but, firstly, people need to know and identify their parochial brain, thanks Krishnan for raising this topic.
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